Venture Capitalists and the Patenting of Innovations

37 Pages Posted: 23 Oct 2013

See all articles by Simona Fabrizi

Simona Fabrizi

Massey University

Steffen Lippert

University of Auckland - Department of Economics

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Date Written: September 2013

Abstract

We model patent‐signaling by informed venture capitalists to incumbent acquirers of developed innovations. We show that, to signal, venture capitalists develop more patents with higher impact than incumbents would. A tightening of patenting requirements by the patent offices, such as an increase in the required inventive step, increases the pool of unprotected early‐stage ideas, which venture capitalists are better at judging than incumbents, and decreases the number and breadth of patented claims needed to separate highly valuable from less valuable innovations. Consequently, such a tightening would make venture capitalists more likely to back entrepreneurs and increase entrepreneurial incentives to innovate.

Suggested Citation

Fabrizi, Simona and Lippert, Steffen and Norbäck, Pehr-Johan and Persson, Lars, Venture Capitalists and the Patenting of Innovations (September 2013). The Journal of Industrial Economics, Vol. 61, Issue 3, pp. 623-659, 2013, Available at SSRN: https://ssrn.com/abstract=2344005 or http://dx.doi.org/10.1111/joie.12028

Simona Fabrizi (Contact Author)

Massey University ( email )

Auckland
New Zealand
+64 9 414 0800 Ext 9335 (Phone)
+64 9 441 8177 (Fax)

HOME PAGE: http://www.massey.ac.nz/~sfabrizi

Steffen Lippert

University of Auckland - Department of Economics ( email )

Auckland
New Zealand

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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